Formulaic Stablecoin

See also: Tian

Similar to algorithmic stablecoin like Dai [1] or Ampl; a formulaic stablecoin is decentralized. Instead of controlling the supply based on the price of the token like in algorithmic stablecoins which require centralized oracles; the supply of the formulaic stablecoin is controlled by the trading volume of the token, and will usually use trading fees to incur the cost of inflation to the traders, not holders. Another difference is that algorithmic stablecoins mint and burn coins to keep the price fixed to another asset, whereas a formulaic stablecoin (usually) never burns tokens but always mints, it just mints less during low volume and more during high volume.

Formulaic stablecoins also require a fair Initial Distribution whereas algorithmic stablecoins do not.

Trilemma

  1. Low fees
  2. stable price
  3. holders maintain value

Trilemma 2

  1. A Unit of Account
  2. A Store of Value
  3. A Medium of Exchange

Token use cases

  1. Decentralized Monetary Policy (formulas for growing supply and stabilizing price, instead of "Federal Reserve Board of Governers")
  2. Mixer (tokens traded anonymously peer-to-peer)
  3. Layer 2 (settlement to the blockchain nightly)



Other pages that link to FormulaicStablecoin:

T

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